Which statement best exemplifies a negative externality?

Question

Quizplus · Accepted Answer

A negative externality occurs when an economic activity imposes costs on third parties who are not involved in the transaction. In this case, second-hand smoke imposes health costs on nonsmokers who are not involved in the smoking transaction. Choices A, C, and D do not exemplify negative externalities but rather illustrate high prices due to scarce resources, individual choices resulting in negative consequences, and external competition, respectively.

Which Statement Best Exemplifies a Negative Externality